It’s one thing to determine your return on investment for graduate school. It’s another to actually come up with the cash to pay for it.
If you’ve decided to continue your education, you might be wondering how much (more) student loan debt to take on. While the easy answer probably is “as little as possible,” here’s how you can figure out the amount of federal and private loans for students you can expect to borrow.
Types of loans for students in graduate school
Before addressing how much you should borrow for graduate school, let’s review how much you could borrow.
By completing the Free Application for Federal Student Aid, you can access Direct Unsubsidized Loans provided by the U.S. Department of Education. The borrowing limit for grad students is higher than for undergrads. You can take out up to $20,500 in unsubsidized loans, or about $8,000 more per year than a college senior.
If you max out your Direct Loan allotment, other federal options and private loans are available.
At the federal level, Graduate PLUS Loans allow you to borrow up to your cost of attendance. The only extra requirement is that you or your endorser don’t have an adverse credit history.
Private lenders also let you borrow up to your program-certified cost of attendance. They consider your or your cosigner’s credit history when determining your interest rate. The better the credit, the lower the rate you could score.
How to determine your borrowing amount and repayment plan
Let’s assume you collect $5,000 in gift aid and have $5,000 in earnings from your part-time job. Any gap between those funds and your college costs could be filled with a loan.
Before you approach the Department of Education or a top private lender, understand that you likely will end up repaying much more than the amount you borrow thanks to interest accruing over the life of the debt.
Let’s say you borrow $15,000 in unsubsidized loans from the Department of Education at the 2017-2018 interest rate of 6.00%. On a standard 10-year repayment plan, you’d be responsible for a monthly payment of $167 and $4,984 in overall interest, according to our student loan payment calculator. So the real cost would be $19,984 — and that’s if you never missed a payment.
Now consider an alternative with a lower rate and repayment term. Let’s say you have a creditworthy cosigner and borrow $15,000 at a 5.00% rate from a private lender. If you choose a five-year repayment plan, you’d repay a total of $16,984 over time, thanks to lower interest charges totaling $1,984. But the shorter repayment term means your monthly payment would balloon to $283.
Before taking out federal or private loans for students, check if you can afford to pay more in interest in the long term or a bigger monthly payment in the short term. That’s the best way to figure out how much you should borrow for graduate school.
How to lower your borrowing amount
Whether you benefit more from federal or private loans, you need to understand your cost of attendance and how to pay for it.
Just because your school says you’re eligible to take out unsubsidized loans, for example, doesn’t mean you must. Instead, you could cut down your cost of attendance by living at home or finding cheaper off-campus housing. Or you could reduce the cost of books by renting or sharing digital copies.
Once you’ve confirmed your cost of attendance, explore ways to pay for graduate school that don’t include debt. For graduate and professional programs, you could consider:
- Asking your employer for tuition reimbursement
- Working at your university to score a tuition discount
- Applying for fellowships via a search engine such as ProFellow
- Starting a side hustle off campus in your spare time
The more common ways to receive financial aid for graduate school include applying for state-based grants and private scholarships.
Start your search on campus. The financial aid office should point you in the direction of aid sources that are specific to your program.
The office also could let you know whether it has a school-based credit union that offers low-interest loans. That would give you another option for loans for students entering graduate school.
Only borrow what you need and can afford to repay
Federal and private loans allow you to borrow up to the cost of attendance, but things can get hairy quickly over debt. The annual tuition alone for graduate school can range between $30,000 and $40,000, according to Peterson’s.
Just because you can borrow a lot doesn’t mean you should. Understanding your repayment plan is one of the best ways to avoid borrowing too much. Think about your long-term ability to repay the loan and whether you’ll be able to afford your monthly payments upon leaving school.
Also, consider factors such as the average salary in your future career or your potential paths to federal loan forgiveness. A future doctor who’s likely to earn six figures might feel better about borrowing for medical school, for example. And an aspiring teacher might be more comfortable about taking on debt for a master’s degree if there are loan repayment assistance programs.
To learn more about loans for students attending graduate school, consider our guide to loans for postgraduates.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|